The Process of Investment with Venture Capital Funding

If you are a business owner who is looking to raise venture capital for your business, then this article is a must-read. We will discuss 5 reasons VCs refuse to invest in the business and the journey of finding funding.

If you are a business owner who is looking to raise venture capital for your business, then this article is a must-read. We will discuss 5 reasons VCs refuse to invest in the business and the journey of finding funding. Some of these include:

How does VC funding work?

Venture Capital (VC) is an investment in a business venture and business world that can either be equity or debt.

This type of funding is widespread among investors and brings them the opportunity for high, long-term returns with little to no risk.

In a venture capital deal, you get to have your own business with one or more other people.

Sometimes these partnerships consist of businesses that are very similar in nature and sometimes they're all different niches. They tend to even offer a similar entrepreneurship.

One important difference between private equity and venture capital is the size of companies being invested in - while private equity deals with funding larger established corporations looking for an infusion of cash and products.

VC firms invest primarily in emerging start-ups who need substantial funding from outside sources for their first time out there on their own.

In the image above, you can see some of the advantages and disadvantages of choosing this process.

How Do Beginners start?

One of the first things you need to do before pitching your idea is research competitors and encourage a competitive mindset.

You want to know whether other companies are out there doing similar work, whether they are working at a faster rate, and how they're faring in terms of funding and success so that you can either emulate them or avoid their mistakes.

You also want to present a high level of entrepreneurship.

The next thing on your list will be a business plan and mindset.

This requires: Forward-thinking.

Thinking about the future and how you'll develop in order for investors to see potential in your idea and company is always a good thing to do also because if questions arise and you are put on the spot about where the business will go, you will appear inventive if you are able to give an answer right away.

It's important to know what they want.

You need to have the investors on your side in order for you to succeed.

If things don't go as planned, it is vital that you are able to keep them happy with regular updates and new information so they will still be behind you as giving up will affect your salaries.

The plan needs to show them what they can get from investing, and how it will be beneficial.

No one is going to put money into a company without some level of assurance that they will be able to get their return at the end.

This means you must try to show investors why they will make a profit on their investment.

This can be difficult to do, but there are five reasons that your business might not get VC funding in the end:

The 5 Reasons why VCs May Not Choose to Invest in your Business

1. Does your business really have a USP?

You may think that it's only a matter of time before your competitors catch up to you. But what if the innovation behind your product means they can't?

This is something not many business owners or partners/ teams are able to say, and protecting this competitive advantage will make all the difference in how long-lasting your business team becomes.

Others may find themselves unable to replicate the content or improve on what you've done with the business products because of some proprietary process or proprietary relationships.

Any success achieved early on would be sustainable for longer periods than those who didn't take the opportunity of following these steps at first onset.

It would be long enough so that investors don’t fear an inevitable downfall following early successes.

2. Know your competition

Not having an in-depth grasp on who and what your competition is, will be another red flag for any investor.

It indicates that you can’t have thought comprehensively about how you want to position your product for the target market.

You should know what differentiates you from the current solutions out there and which markets and methods of selling they are using.

It’s not a VCs job to do this for you, they will expect you to present them with a detailed breakdown of your competition and your plan of action if you want their investment.

3. Know your numbers

If you walk in with messy spreadsheets and you are running on desktop software, it doesn’t look like you prioritize the figures or are data-driven.

Futrli syncs and updates daily with your cloud accounts package, to create beautiful-looking rolling forecasts.

These operational forecasts are your security blanket and they should be the pulse behind every decision you make.

If you can show you have thought through several scenarios and you have a sound process in place for regular monitoring, this will speak volumes to an investor.

If you want some serious brownie points, stress during your pitch that you want them to feel like part of your team.

With Futrli, you can invite them to view and collaborate on your figures. This will give your backer complete transparency of their investment.

Together you can decide their access levels and control what information they want to see on a daily, weekly, or monthly basis.

Also, you will be able to sell this idea even more by the fact that this information is designed to be easily accessible for them to work from wherever they are.

4. Go big or go home

Have you ever watched Dragon’s Den in the UK or Shark Tank in Australia, and seen how badly it goes down when the business owner pitching reveals they‘re unwilling to invest their own savings?

VCs want to see 100% commitment to your company and that you are willing to fight to the death. That may sound dramatic, but experienced VCs know that this is often the difference between a decent return or never seeing their money again.

Provide a competitive edge. VCs are not looking for one-trick ponies. They want to invest in companies that offer something unique and different, but also provide the potential of exponential growth with only limited risk.

The better your company stands out from competitors, the more likely you're going to be able to get their attention.

5. Find your best scalable marketing channels

VCs like to invest in businesses that have begun to identify their best scalable marketing channels, so they know any capital invested won’t just be thrown away during an initial experimental/testing stage.

This gives them confidence that if they make the investment and it doesn't work out as planned; then at least all of those funds weren't wasted on something elsewhere success was not guaranteed!

Investors will invest in businesses they believe have high potential, so it’s important to be realistic when marketing your business.

If a new investor has already been approached by five other competitors about the same investment opportunity, he or she is less likely to listen.

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